UBS Sets Logitech Shares to Sell in Soft Consumer Environment via Investing.com

UBS issued a report on Logitech (NASDAQ: ) International SA (SWX: LOGN ), maintaining a 12-month “Sell” rating and setting a CHF 65.00 target price.

The analysis highlighted the importance of pricing as an indicator of consumer demand and margins for Logitech products.

The firm tracked price trends for key Logitech items sold on Amazon (NASDAQ: ) in the United States, which represent about 25-30% of Logitech group sales. These products mainly come from divisions that contribute more than 95% of earnings: games, PC peripherals and video conferencing.

Despite recent average selling price (ASP) increases of 10-15% to offset inflation, lower input costs have yet to be reflected in consumer prices in the hardware industry.

However, there are emerging signals that this may be changing. Notably, Logitech posted the highest rate of revenue among its gaming peripheral peers during the COVID period, presenting challenging comparisons going forward.

Looking at specific product categories, UBS saw a month-over-month drop in ASPs for Logitech gaming mice (-7%), keyboards (-6%) and headsets (-4%). In contrast, non-gaming categories such as PC mice saw a smaller decline (-2% m/m), while keyboard and video conferencing ASPs increased by +3% and +3% respectively +1%

This resistance in PC peripheral prices is partially attributed to the exit of Microsoft (NASDAQ: ) about 9-12 months ago. However, Incase’s plan to relaunch Microsoft’s PC peripherals business in the second half of 2024 could reintroduce competitive pricing pressures.

Logitech’s guidance acknowledges some risks, but actual sales, which reflect end-consumer demand, remain crucial. In Q1 FY25, sales growth was modest at +3% year-on-year compared to a +12% sales figure.

Given a soft consumer environment in North America and potential market share losses in China, weak sales are expected to continue. This may cause Logitech to increase promotions, which may affect volumes and margins.

UBS also noted that investor expectations for Logitech appear bullish, with estimates of 17-18x EV/EBITDA for FY 2025E. These high valuations carry significant upside risk to consensus estimates, which UBS suggests may not fully materialize over the next 6-12 months.

This article was generated with support from AI and reviewed by an editor. For more information, see T&C.